Second-party Data vs Third-party Data: Which You Should Add to Your Data Mix

You’ve heard of first-, second- and third-party data – and big data too. But what’s the difference? And, most importantly, which is the type of data you need?

In our previous post we explained what first-party data is and five ways you can leverage it for better performance. First-party data is the most used source of information, reported by 81% of organizations, followed by second-party data (77%), and third-party data (61%).

Although first-party data is the most used source of intel, this type of data can be scarce and tough to scale. Marketers have taken notice of the limitations on using first-party data and are looking for ways to supplement it. Research shows that 30% are planning to increase the use of second-party data, while 23% plan to increase use of third-party data.

third-party data
Second-party data is a trusted partner’s first-party data.

To make the most of digital campaigns, marketers need to understand how to use second and third-party data to supplement their first-party data. Here’s what you need to know:

Second-Party Data

 

Second-party data is data that is not collected directly from your customers. Instead it’s derived from a trusted partner’s first-party data. You can access this data by making an arrangement with a partner to share their customer data with you in return for your data or by paying them. Both parties determine the terms of sale in advance. And this sharing of high-quality first-party data gives you access to audiences you might not otherwise been able to reach.

For instance, a hotel company and an airline company can build a mutually beneficial data agreement. Reaching a verified audience of flight-bookers will help the hotel company target an audience likely to need a room. At the same time, airlines can gain from data that allows them to target travelers based on length of stay and destination. In the same way, retailers and manufacturers find it useful to share data through second-party agreements. The key is to seek out, form, and maintain partnerships with companies whose data sets complement yours and vice versa.

Tip: Second-party data allows you to find new customers who show the same patterns as your current customers. Use this data to build predictive lookalike models – users who have never visited your website but still score high in propensity to convert.
third-party data
Use second-party data to build predictive lookalike models.

Second-party data is unique because like first-party data, it is based on an exclusive relationship and is not far removed from its source – the customer. Through an agreement with the right partner, you can ensure access to quality data that your competitors might not be able to obtain.

Third-Party Data

 

Third-party data is data aggregated through multiple external platforms and partnerships. In other words, it’s collected by companies that might not have a direct relationship with the customers the information is based on. Data providers use data management platforms (DMPs) to compile data from a broad range of sources. This aggregated data is built into customized segments that are then sold for fee, often on a CPM basis.

This data is valuable because it can be layered over your first-party data to create more tight-knit segments. For example, if you are a luxury brand, you can take a list of people who have visited your website but have not made a purchase and layer third-party demographic data, like household income to target big spenders.

Tip: Use third-party data as the base for content personalization and product recommendations. Amazon has popularized this tactic and now most e-commerce sites are using it.
third-party data
E-commerce sites can use third-party data to recommend products.

Overall, third-party data is highly scalable. The sheer volume of data can boost any marketing campaign. It’s also hassle-free and easy to buy. On the downside, competitors can buy the same data. Also, third-party data providers are not always transparent about where the data is coming from.

 

Have a great idea for how to leverage second- and third-party data? Leave a comment to share your thoughts.

 

 

 

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